Local manufacturing does not necessarily bring down prices: Tomas Ernberg

Trying to strengthen its foothold in the Indian market, Swedish luxury car maker Volvo Auto India is not only looking at introducing its latest global models like the V40 Cross Country but is also eyeing a more than 15 per cent share of the luxury car market by 2020. While the company's volumes are expected to touch 20,000 units by then, it is yet to finalise any plan of setting up an assembly unit in the country. Tomas Ernberg, managing director, Volvo Auto India, tells Sohini Das that setting up an assembly plant does not necessarily mean the prices of the cars would come down. Edited excerpts:

You are bringing in the V40 Cross Country next year. How do you plan to price it and what are your growth plans in the short term?
We are bringing in the V40 Cross Country by end-March next year and it would be priced below the S60 sedan, which is priced around Rs 24 lakh ex-showroom. But, yes, we are certain we would not be having a car under the Rs 20 lakh mark in India, so it would be around Rs 23 lakh and above. We have sold 820 cars in India this year, against a target of 800.

This is up by 150 per cent from last year's 320 cars. For next year, we are looking at growing by 50 per cent, and the long-term target is to sell 20,000 cars (a year) in India.

To sustain your growth plans, when do you plan to start an assembly unit in India?
No decision yet; it depends on when it makes strategic sense to invest in a plant.

Also, local manufacturing does not necessarily bring down prices. It is common psyche that if we have a plant here, the prices will come down. Actually, we did a small survey and found prices actually increase. There is investment in the land, in the factory and other overhead costs. One should have a specific business plan before making any significant investment in plant locally. With our Sweden and Belgium plants combined, we have enough capacity to cater to demand worldwide. We are in the process of setting up two factories in China but that would be dedicated for only China. Besides, we have an assembly unit in Kuala Lumpur since the 1970s; it caters to the Malaysian market. As of now, no plans to bring cars from there into India.

Are volumes such as 20,000 per annum sustainable without a local assembly unit?
We import around 80,000 cars in the US, around 45,000 into the UK, around 45,000 into Germany and around 60,000 into China, We are looking at a volume of 200,000 in China. India is a heavy-duty market, like Brazil. So, it makes sense to invest in local units in these countries. We have a team for that. They have come and done their survey but no decision has been taken yet.

What market share are you eyeing in the luxury car segment here in the coming years?
By 2020, we expect the luxury car market in the country to be around 150,000 cars. We are eyeing a market share of over 15 per cent in the segment.

The luxury car market in India is around one per cent of overall industry volume. Around four to five years earlier, it was around 0.1 per cent. Worldwide, the share of luxury cars in the overall market is around 10 per cent. By 2020, we estimate the luxury car segment to be around three per cent of the overall passenger car market in the country. So, there is huge opportunity for growth. India is going to be one of the biggest markets for us, worldwide.

It would be bigger than many European markets. We enjoy a 10 per cent market share in the luxury car segment in Europe.